Whenever desired reserves exceed actual reserves, the bank
A)is in a profit- making position.
B)can make new loans.
C)will go out of business.
D)will call in loans.
E)has excess reserves.

Question

Quizplus · Accepted Answer

When a bank's desired reserves exceed its actual reserves, it indicates that the bank does not have enough reserves on hand to meet its desired reserve ratio. To rectify this situation and ensure it meets regulatory requirements or its own internal policies, the bank may call in loans to increase its reserves. This action helps the bank to realign its actual reserves with its desired reserves level.

Whenever Desired Reserves Exceed Actual Reserves, the Bank